“Our only job is to ensure competition, basic protections for workers and let capitalism do its magical best.”

If this is Tesco capitalism, sign us up.

The only place where we may differ from Tim is in our definition of competition. Adam Smith thought that an open market where competitors sought to undersell each other would allocate resources efficiently, aligning supply with demand as if by an “invisible hand.” In contrast, he thought that a monopoly, without threats to its profit-making, would become inefficient and abusive in its management of resources.

But today we look at competition and market concentration very differently. We have seen that, as Tim points out, concentrated markets with a small number of big players can be socially beneficial. Stores with immense market power like Tesco – which today sells one third of all groceries in the UK – usually emerge because they are efficient. Even if they sometimes use that power to distort prices or depress wages, they can still save the consumer money. As a result, even if only four retailers sell three quarters of all groceries, the low prices they offer mean they represent what the Competition Commission called “a good deal for the consumer.”

This is nothing to scoff at. People on the lowest incomes spend on average more than 15% of their pay on food, so keeping grocery costs low can have a huge progressive impact for society. However, I would disagree with Tim that low prices are all that we want from competition.